Investigating the impact of hedge horizon upon hedging effectiveness: evidence from the national stock exchange of India / Mandeep Kaur and Kapil Gupta
This study investigated the impact of hedge horizon upon hedging effectiveness in Indian equity futures market by comparing hedging performance of near, next and far month futures contracts of the NIFTY50 index and its 17 composite stocks. Hedging effectiveness was measured using two approaches, nam...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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Accounting Research Institute (ARI), UiTM Shah Alam
2019
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| Online Access: | https://ir.uitm.edu.my/id/eprint/30967/ |
| _version_ | 1848807633879826432 |
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| author | Kaur, Mandeep Gupta, Kapil |
| author_facet | Kaur, Mandeep Gupta, Kapil |
| author_sort | Kaur, Mandeep |
| building | UiTM Institutional Repository |
| collection | Online Access |
| description | This study investigated the impact of hedge horizon upon hedging effectiveness in Indian equity futures market by comparing hedging performance of near, next and far month futures contracts of the NIFTY50 index and its 17 composite stocks. Hedging effectiveness was measured using two approaches, namely, Variance Reduction approach and RiskReturn approach. The study found that near month futures contracts are most effective when hedge effectiveness is measured using the variance reduction approach, whereas, far month futures contracts are found to be most effective using the risk-return approach. These results imply that for highly risk-averse investors (concerned with only minimization of risk), near month futures contracts enable effective hedging, whereas for less risk-averse investors (concerned with risk as well as return), far month futures contracts offer superior hedge effectiveness. The study also found that coefficient of correlation between spot and futures returns is a significant factor affecting variance reduction of returns and bears a direct relationship with it. |
| first_indexed | 2025-11-14T22:45:56Z |
| format | Article |
| id | uitm-30967 |
| institution | Universiti Teknologi MARA |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-14T22:45:56Z |
| publishDate | 2019 |
| publisher | Accounting Research Institute (ARI), UiTM Shah Alam |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | uitm-309672022-06-15T03:17:07Z https://ir.uitm.edu.my/id/eprint/30967/ Investigating the impact of hedge horizon upon hedging effectiveness: evidence from the national stock exchange of India / Mandeep Kaur and Kapil Gupta mar Kaur, Mandeep Gupta, Kapil Stock exchanges. Insider trading in securities This study investigated the impact of hedge horizon upon hedging effectiveness in Indian equity futures market by comparing hedging performance of near, next and far month futures contracts of the NIFTY50 index and its 17 composite stocks. Hedging effectiveness was measured using two approaches, namely, Variance Reduction approach and RiskReturn approach. The study found that near month futures contracts are most effective when hedge effectiveness is measured using the variance reduction approach, whereas, far month futures contracts are found to be most effective using the risk-return approach. These results imply that for highly risk-averse investors (concerned with only minimization of risk), near month futures contracts enable effective hedging, whereas for less risk-averse investors (concerned with risk as well as return), far month futures contracts offer superior hedge effectiveness. The study also found that coefficient of correlation between spot and futures returns is a significant factor affecting variance reduction of returns and bears a direct relationship with it. Accounting Research Institute (ARI), UiTM Shah Alam 2019-08 Article PeerReviewed text en https://ir.uitm.edu.my/id/eprint/30967/1/30967.pdf Kaur, Mandeep and Gupta, Kapil (2019) Investigating the impact of hedge horizon upon hedging effectiveness: evidence from the national stock exchange of India / Mandeep Kaur and Kapil Gupta. (2019) Management & Accounting Review (MAR) <https://ir.uitm.edu.my/view/publication/Management_=26_Accounting_Review_=28MAR=29.html>, 18 (2): 6. pp. 131-162. ISSN 2550-1895 https://mar.uitm.edu.my/ |
| spellingShingle | Stock exchanges. Insider trading in securities Kaur, Mandeep Gupta, Kapil Investigating the impact of hedge horizon upon hedging effectiveness: evidence from the national stock exchange of India / Mandeep Kaur and Kapil Gupta |
| title | Investigating the impact of hedge horizon upon hedging effectiveness: evidence from the national stock exchange of India / Mandeep Kaur and Kapil Gupta |
| title_full | Investigating the impact of hedge horizon upon hedging effectiveness: evidence from the national stock exchange of India / Mandeep Kaur and Kapil Gupta |
| title_fullStr | Investigating the impact of hedge horizon upon hedging effectiveness: evidence from the national stock exchange of India / Mandeep Kaur and Kapil Gupta |
| title_full_unstemmed | Investigating the impact of hedge horizon upon hedging effectiveness: evidence from the national stock exchange of India / Mandeep Kaur and Kapil Gupta |
| title_short | Investigating the impact of hedge horizon upon hedging effectiveness: evidence from the national stock exchange of India / Mandeep Kaur and Kapil Gupta |
| title_sort | investigating the impact of hedge horizon upon hedging effectiveness: evidence from the national stock exchange of india / mandeep kaur and kapil gupta |
| topic | Stock exchanges. Insider trading in securities |
| url | https://ir.uitm.edu.my/id/eprint/30967/ https://ir.uitm.edu.my/id/eprint/30967/ |